Stock Markets Exposed

What kind of Taxes hit you if you make money on the stock market?

I've read dozens of stock market 'investing' books but not one has ever mentioned taxes: what kind, how much, or how to prepare to pay Uncle Sam if you make a chunk of change by investing? Are there any books out there specifically dealing with how to pay taxes on money earned by the stock market? (stocks, bonds, derivatives, etc.)? Thank you! Are we talking about federal taxes, state taxes, or both?

Public Comments

1. You pay income takes at your normal rate for short term gains and generally a lower rate for long-term gains. You "prepare" by completing a Schedule C with your income tax return
2. depends on how long you hold the stock,,, under one year is 26% over one year is less.. capital gains tax
3. The profit is called "capital gains", and there is a capital gains tax. You would have to call the IRS and they would be able to tell you what that is. Keep in mind that you don't have to pay the capital gains tax until you actually sell the stock, bonds, whatever.
4. If you make a "chunk of change" in stocks held less than one year, your gains are taxed the same as your regular income tax rate. If held over one year, the gains are taxed at 15% (Obama wants to rase it to 20%) or less, depending on your bracket. If you will owe a large enough amount on next April 15, the government does not want to wait for your money. You must pay estimated taxes on or before Jan (it should be December but the govt. is giving you a one month X-mas present type of delay) 15, April 15, June 15 and Sept. 15.
5. You pay capital gains taxes on your net profits. Short term gains are taxed at your normal tax rate. Long term gains depend on your tax bracket. But they are capped at 15 percent. and for qualified dividends. You claim gains and losses on capital gains on Schedule D. Schedule C is for sole proprietor businesses.
6. income tax on dividends; capital gains tax on capital gains.
7. Taxes are actually a non-trivial consideration in investing. Capital Gains Tax is what you pay when an investment appreciates in value and then is sold. Short term and long term gains are taxed differently. You also pay regular income tax on Interest (like from bonds) and dividends. You can look up the current tax rates on the IRS website. How much tax you pay on interest is determined by your tax bracket.
8. everyone else has answered the "how much" portion of the question, so i will answer the "how to prepare" portion: after i make a trade, i like to immediately forward 27% of my profits into a Money Market account. (you dont have to do 27%, but just make sure its higher than what you're being taxed). When tax time comes, just pay what you owe and use the leftovers for a vacation or to put back into the market. it works out great, and i'm always sure to have what i owe available. plus, the vacation is nice as well.